MACRO REV

The interest rate on a financial asset​ ______.

C. falls as the price of the asset rises

The largest asset of commercial banks are​ _______.

C. loans

Induced taxes​ ______ during a recession. ​Needs-tested spending​ ______ during a recession.

. ​decrease; increase

The Rule of 70 is the number of years it takes for the level of any variable to double. It is approximately 70​ _____ by the annual percentage​ _

. ​divided; growth rate of the variable

The interest rate on a financial asset​ ______

falls as the price of the asset rises

One of the reasons why this rapid increase occurred during this decade was that​ ______

family budgets became more stretched

Financial capital is​ _______.

the funds used to buy physical capital

A south sea island produces only coconuts. In​ 2010, the price of a coconut is ​$2.00 and the quantity produced is 300. In 2016​, the price of a coconut is ​$2.50 and the quantity produced is 350. 2010 is the base year. Real GDP in 2016 is​ ______.

$700

Examples of capital include all of the following except​ _______.

. Google stock

The Fed regards price stability as being achieved when the core inflation rate is​ _______.

A. 2 percent a year

Economics studies choices that arise from one fact. What is that​ fact?

A. Everyone faces scarcity.

Which of the following is an example of an incentive​?

All conference volunteers would be offered free lunch on all three days.

Sustained growth of real GDP per person can transform a poor country into a wealthy one because economic growth​ ______

B. is applied to a larger and larger real GDP each year Y

Wealth is the value of all the things that people​ _____.

B. own

When new and better ways of producing all goods and services are discovered or when the quantity of capital​ increases

B. the production possibilities frontier shifts outward Your answer is correct.

The news headline ​"IBM's Quasar: Is it the future of computing question mark ​" deals with the​ ______​ question(s) of economics.

B. what and how

If real GDP is​ $1,000,000, exports are​ $200,000, imports are​ $300,000, and aggregate labor hours are​ 100,000, labor productivity is​ _____.

B. ​$10 per hour

​Supply-side effects consist of the effects of​ _____ policy on​ _____ and​ _____.

B. ​fiscal; potential​ GDP; the economic growth rate

The reference base period is a period for which the​ _____ is defined to equal​ _____. Currently, the reference base period is​ 1982-1984.

CPI; 100

If Country A allocates more resources to producing capital goods than does Country​ B

Country A will incur a larger opportunity cost of​ growth, but it will grow more quickly than Country B

Which of the following is an example of​ investment? A. a person investing $ 250 a month in the stock market B. a person's annual medical checkup C. a person depositing $ 100 a week to her savings account D. the purchase of new buses by Greyhound

D. the purchase of new buses by Greyhound

​_______ published The General Theory of​ Employment, Interest, and Money in​ _______

D. too little private spending is the cause of depression and recession

An increase in disposable​ income, other things remaining the​ same, ______ the equilibrium real interest rate and​ ______ the equilibrium quantity of loanable funds.

D. ​lowers; increases

In an​ expansion, the expected profit rate​ ______ and, other things remaining the​ same, the demand for loanable funds​ ______. A. ​rises; does not change but the quantity of funds demanded increases B. ​falls; does not change but the quantity of funds demanded decreases C. ​falls; decreases D. ​rises; increases

D. ​rises; increases

Suppose a Canadian dollar bank deposit in Toronto earns 4 percent a year and a U.S. dollar bank deposit in Chicago earns 1 percent a year. What expectations do people hold if interest rate parity is to​ hold?

For interest rate parity to​ hold, people expect that the U.S. dollar will appreciate by 3 percent a year.

Once a​ month, the Bureau of​ ______ Statistics calculates the Consumer Price​ Index, which is a measure of the​ ______ consumers for a fixed basket of consumer goods and services.

Index​; discounted prices paid by all B. Urban​; retail prices paid by urban C. Price​; prices paid by all D. ​Labor; average of the prices paid by urban

______ macroeconomics is the view that the market economy is inherently unstable and needs active government intervention to achieve full employment and sustained economic growth.

Keynesian

You buy a coffee at Starbucks. -A money flow from households through goods markets to firms The government buys some Dell computers. -A real flow from firms through goods markets to government A student works at Kinko. -A real flow from households through factor markets to firms Donald Trump rents a building to Marriot hotels. -A real flow from households through factor markets to firms You pay your income tax. -A money flow from households to government

SEE ANS

Choose the statement about the Fed that is correct.

The FOMC meets approximately every six weeks to review the state of the economy.

Does inflation targeting achieve lower inflation​ rates? Choose the correct statement.

The United Kingdom and New Zealand have missed their inflation targets but the other inflation targeters have achieved theirs.

the central banks of​ ______ practice inflation targeting.

The United​ Kingdom, Canada,​ Australia, New​ Zealand, Sweden, and the Euro countries

Choose the correct statement. A. There is no tradeoff associated with economic growth. B. Economic growth abolishes scarcity. Your answer is not correct.C. The cost of economic growth is fewer consumption goods in the future. D. The cost of economic growth is fewer consumption goods today. This is the correct answer.E. With economic​ growth, production becomes a free lunch.

The cost of economic growth is fewer consumption goods today.

Choose the correct statement. A. With economic​ growth, production becomes a free lunch. B. The cost of economic growth is fewer consumption goods in the future. C. Economic growth abolishes scarcity. D. There is no tradeoff associated with economic growth. E. The cost of economic growth is fewer consumption goods today.

The cost of economic growth is fewer consumption goods today.

The currency drain ratio is 0.5 and the desired reserve ratio is 0.4. What is the money​ multiplier?

The currency drain ratio is 0.5 and the desired reserve ratio is 0.4. What is the money​ multiplier? The money multiplier is 1.7.

The money multiplier is 2.0 and the currency drain ratio is 0.2. What is the desired reserve​ ratio?

The desired reserve ratio is 0.4.

The table gives the demand and supply schedules for lattes. What are the equilibrium price and equilibrium quantity in the market for lattes​? The equilibrium price is ​$ 5 a latte. The equilibrium quantity is 500 lattes per day. Price Quantity demanded Quantity supplied ​(dollars per latte​) ​(lattes per​ day) 1 700 100 2 650 200 3 600 300 4 550 400 5 500 500 6 450 600

The equilibrium price is ​$ 5 a latte. The equilibrium quantity is 500 lattes per day.

Consider potential GDP and then choose the statement that is correct.

The potential GDP line is vertical because potential GDP is independent of the price level.

The quantity of U.S. dollars that traders plan to buy in the foreign exchange market in a given period of time is independent of​ ______.

The price of gold

In the market for beef comma the price of a pound of beef falls. Explain the effect of this event on the quantity of beef supplied and on the supply of beef.

The quantity of beef supplied decreases and the supply of beef is unchanged.

Consider the short run and the long run and then choose the statement that is correct. A. In the short​ run, other things remaining the​ same, a given percentage change in the quantity of money brings an equal percentage change in the price level. B. The real interest rate is dependent on the price level in the long run. Your answer is not correct.C. The real interest rate is independent of the inflation rate in the long run. This is the correct answer.D. In the short​ run, money market equilibrium determines the price level.

The real interest rate is independent of the inflation rate in the long run.

Sally has a credit card balance of ​$10 comma 000. The credit card company charges a nominal interest rate of 19 percent a year on unpaid balances. The inflation rate is 7 percent a year. Calculate the real interest rate that Sally pays the credit card company.

The real interest rate that Sally pays the credit card company is 12 percent a year.

Consider the demand for​ labor, and then choose the statement that is correct. A. Each additional hour of labor hired produces more additional output than the previous hour. B. The demand for labor curve is downward sloping because hours per person increase as the real wage rate falls. C. The real wage rate influences the quantity of labor demanded because what matters to firms is how much output they must sell to earn the dollars they pay the workers. Your answer is correct.D. The higher the real wage​ rate, the greater is the quantity of labor that firms find it profitable to hire because firms can hire​ higher-skilled labor at higher wage rates.

The real wage rate influences the quantity of labor demanded because what matters to firms is how much output they must sell to earn the dollars they pay the workers.

Choose the statement that is correct.

The true tax rate on interest income is higher than that on labor income because of the way in which inflation and taxes on interest income interact.

The table gives information about a​ nation's labor force. What is the unemployment​ rate? Labor Market Data ​Working-age population: 215.1 million Labor force: 143.7 million Unemployed: 6.8 million

The unemployment rate is 4.7 percent.

The table gives data about​ Northland's economy in 2016. What is the value of GDP in Northland in 2016​? The value of GDP in Northland in 2016 is ​_______. A.

The value of GDP in Northland in 2016 is ​_______. A. ​$1 comma 213 billion 5-11

The table shows the amounts held as the various components of M1 and M2. Calculate the value of M1 and M2. Item ​$billions Savings deposits: 375 Checking deposits: 100 Small time deposits: 250 Money market funds and other deposits: 220 Currency and​ traveler's checks:80

The value of M1 is ​$ 180 billion. The value of M2 is ​$ 1025 billion.

In 2009​, U.S. exports of goods and services are ​$1 comma 587 billion and imports of goods and services are ​$1 comma 976 billion. What is the value of net​ exports? The value of net exports in 2009 is negative 389 billion dollars.

The value of net exports in 2009 is negative 389 billion dollars.

An example of ceteris paribus is the statement​ ______.

To study the effect of a wage rise on the number of employees comma keep the population constant

The figure shows the flows of expenditure and income on Lotus Island. In​ 2016, R was ​$5 ​billion; W was ​$32 ​billion; U was ​$14 ​billion; J was ​$17 ​billion; and Z was ​$4 billion. Calculate total expenditure and total income.

Total expenditure is ​$ 67 billion. Total income is ​$ 67 billion 5-2

The graph shows the unemployment rate in the United States from 1960 to 2016. The average unemployment rate was lowest during the 1960s and it resulted from​ ______.

Vietnam war defence spending and consumer spending encouraged by expanded social programs

Which of the following illustrates goods markets​? Which of the following illustrates factor markets​?

Walmart sells potatoes at​ $2.14 a pound. Ann bought a new condo for​ $200,000.

Which of the following are examples of monetary policy that decrease aggregate​ demand?

a decrease in the quantity of money and an increase in interest rates

The average unemployment rate was highest during the 1980s and it resulted from​ ______.

a deep recession 6-2

The table sets out an​ economy's aggregate demand and aggregate supply schedules. Price level Real GDP demanded Real GDP supplied ​(GDP deflator) ​(billions of 2009​ dollars) 90 900 600 100 850 700 110 800 800 120 750 900 130 700 ​1,000 If potential GDP is​ $600 billion, the economy is​ _______. In the long​ run, ______.

above full employment and has an inflationary gap aggregate supply​ decreases, the price level​ rises, and real GDP decreases to potential GDP

When investment​ increases, _______

aggregate demand increases and income increases. The increase in income induces an increase in consumption expenditure so aggregate demand increases by more than the initial increase in investment

So real GDP equals​

aggregate hours multiplied by labor productivity

Equilibrium expenditure is the level of aggregate expenditure that occurs when​ ______.

aggregate planned expenditure equals real GDP

In the United​ States, the CPI basket consists of items that​ ______. ​______ has the greatest weight in the CPI basket.

an average urban household​ buys; Housing

You observe that inventories are taking an unplanned dive. You predict that there will be​ ______.

an expansion

The costs of inflation do not include​ _______. A. the tax on money held by individuals and businesses B. an increase in saving and investment This is the correct answer.C. the cost of running around to compare prices at different outlets Your answer is not correct.D. the increased opportunity cost of holding money

an increase in saving and investment

​Inflation-targeting central banks​ _____.

announce a target inflation​ rate, and publish an inflation report that explains how and why the central bank believes its current policy actions will achieve its ultimate goals

The production function separates​ ______ .

attainable combinations of labor hours and real GDP from unattainable combinations

Loanable funds are used to finance​ ______.

business​ investment, a government budget​ deficit, and international investment or lending

Suppose the Fed wants to keep the dollar pegged at 0.90 euros per dollar. If the demand for dollars decreases permanently and the exchange rate falls below 0.90 euros per​ dollar, the Fed would have to​ ______.

buy dollars and sell euros every day

A market is an arrangement that brings​ _____ together and enables them to get information and do business with each other.

buyers and sellers

The U.S. saving rate increased from minus0.1 percent in 2011 to 2.0 percent in 2012 to 2.4 percent in​ 2013, to 2.9 percent in​ 2014, and to 3.0 percent in 2015. A negative saving rate occurs if​ ______.

consumption expenditure exceeds disposable income

​Cost-push inflation is an inflation that begins with an increase in​ _____.

cost

The fiscal stimulus that returns the economy to full employment from a below​ full-employment equilibrium​ _______.

could be an increase in government expenditure and an equal increase in taxes

A minimum wage set above the equilibrium wage rate for​ low-skilled workers​

creates unemployment among​ low-skilled workers

In 2009 comma the Japanese economy was below full employment. A policy to restore full employment might​ ______. This policy would create inflation if​ ______.

cut ​taxes, increase government​ expenditures, or increase the quantity of money the demand stimulation was so strong that it moved real GDP above potential GDP

An electrician who is laid off because the economy is in a recession and who gets rehired some months later when the expansion begins experiences ​______.

cyclical employment

The cut in employment at the U.S. Postal Service results in​ ______ unemployment because​ _______.

cyclical; the workforce is being decreased because of the economic slowdown

National debt is the amount of government​ _____ -​ _____ that has arisen from past​ _____.

debt​ outstanding; debt; budget deficits

Induced taxes and​ needs-tested spending​ _______ the multiplier effects of changes in autonomous expenditure.

decrease

Much of Africa experiences slow economic growth because it lacks​ ______.

economic​ freedom, private property rights that are​ enforced, and markets that function well

A rise in the money wage rate when the economy is at potential GDP​ ______.

decreases aggregate supply because a rise in the money wage rate increases​ costs, so firms employ fewer workers

An increase in the minimum wage​ ______

decreases employment and increases unemployment if it is set above the equilibrium wage rate

The requirement to raise more capital can make financial institutions safer because by using more of its own funds and less borrowed​ funds, a financial institution​ ______.

decreases its risk of insolvency

When the price level rises but the money wage rate remains​ unchanged, unemployment​ ______ and the quantity of real GDP supplied​ ______.

decreases; increases

Between 2001 and​ 2008, traders expected the U.S. dollar to​ ______ against the euro and it​ ______.

depreciate; did depreciate

An increase in the income tax rate is an example of​ ______.

discretionary fiscal policy

The production function​ _______.

displays diminishing returns

A rational expectation is a forecast that results from the use of all the relevant data and​ _____.

economic science

Much of Africa experiences slow economic growth because it lacks​ ______. A. a healthy labor force B. manufactured goods from developed countries C. economic​ freedom, private property rights that are​ enforced, and markets that function well Your answer is correct.D. the motivation to grow E. safe drinking water and adequate sewage systems

economic​ freedom, private property rights that are​ enforced, and markets that function well

The preconditions for economic growth are​ ______.

economic​ freedom, private property​ rights, and markets

If the real wage rate is at the​ full-employment equilibrium​ level, real GDP is​

equal to potential​ GDP, which is efficient but is not the most that can be produced

Purchases of new national defense equipment flow from​ ______ through the​ ______ markets.

governments to​ firms; goods

The opportunity cost of producing a tub of ice cream is​ ______ at point A than at point B. The opportunity cost of producing a pound of butter is​ ______ at point B than at point A.

greater​; greater ref 3-5

Expenditure on consumption goods and services flows from​ ______ through the​ ______ markets.

households to​ firms; goods

You've seen that the global distribution of income is unequal. Why do you think it is​ unequal? The global distribution of income is unequal because there is an unequal distribution of​ ______

human capital and physical capital

As more people in India have access to higher education​ ______ and in the long run​ ______.

human capital​ increases; both potential GDP and aggregate supply increase

A Clinton Foundation success story is that it loaned​ $23,000 to Rwandan coffee growers to support improvements to coffee washing stations and provided technical support. What was the source of the​ success? The source of the success of the coffee growers is​ _______.

increase in human capital and improvements to washing​ stations, which changed physical capital

U.S. consumer confidence edges up The​ Reuters/University of Michigan Surveys of Consumers reported a rise in September of consumer confidence that exceeded​ economists' expectations and a rise in expected inflation to 3.7 percent from 3.5 percent a year. Such a rise should be a concern to the Federal​ Reserve, which has been pumping money into the economy in an attempt to contain the recession and spur a recovery. ​Source: The New York Times​, September​ 16, 2011 If the Fed is concerned about inflation and unexpectedly slows money​ growth, explain how unemployment will change in the short run and in the long run. If the Fed is concerned about inflation and unexpectedly slows money​ growth, unemployment​ ______ the natural unemployment rate in the short run. In the long​ run, unemployment​ ______ the natural unemployment rate.

increases​ above; returns to

GM, UAW reach crucial​ cost-cutting pact GM and the UAW agree on restructuring​ workers' jobs. This​ restructuring, with no change in the wage​ rate, will save GM billions in labor costs. ​Source: Wall Street Journal​, May​ 22, 2009 Will this reduction of labor​ costs, with no change in the wage​ rate, change​ GM's supply of​ vehicles? The cut in labor costs with no change in the wage rate will​

increase​ productivity, which will increase​ GM's supply of vehicles

For​ consumers, Upper T dash shirts and tank tops are substitutes. If the price of a Upper T dash shirt increases​, the demand for tank tops will​ _______

increase​, and the demand curve for tank tops will shift rightward

Which of the following are included in the income approach to measuring​ GDP? A. rent​; profit​; government expenditure on goods and services B. interest​; rent​; investment C. interest​; rent​; profit This is the correct answer.D. profit​; investment​; net exports of goods and services

interest, rent: profit

If aggregate planned expenditure is less than real​ GDP, then​ _______.

inventories​ increase, and as real GDP decreases a movement down along the AE curve occurs

The graphs below show the federal government deficit and debt from 2000 to first quarter of 2019 ​(the most recent​ quarter). When budget is​ ________, the debt increases. A​ _______ brings​ ___________ .

in​ deficit; large​ deficit; fast-growing debt

The value of the CPI in the base period​ ______

is 100 no matter what reference base period is chosen

An economy is at full employment. If it experiences an unexpected reduction in the inflation​ rate, the inflation reduction​ ______. If the Fed announces an inflation reduction policy and is successful in lowering the expected inflation​ rate, the inflation reduction​ ______.

is accompanied by recession and unemployment moving above the natural unemployment​ rate; results in a lower inflation rate with no accompanying loss of output or increase in unemployment

Sustained growth of real GDP per person can transform a poor country into a wealthy one because economic growth​ ______.

is like compound interest

A​ bank's liquid assets consist of​ ______. A. the money in its ATMs and the bonds that it​ owns, which are issued by the U.S. government and by other​ large, safe organizations Your answer is not correct.B. the currency in its vaults and the money in checking and savings deposits C. currency in its vaults plus the balance on its reserve account at a Federal Reserve Bank D. its​ short-term Treasury bills and overnight loans to other banks

its​ short-term Treasury bills and overnight loans to other banks

Consider the functional distribution of income. The largest percentage of income paid to the factors of production is paid to​

labor

Potential GDP is the value of real GDP when all the​ economy's factors of production​ - _____,​ _____, _____, and​ _____ - are fully​ _____.

labor; capital;​ land; entrepreneurial​ ability; employed

A real business cycle is a cycle that results from fluctuations in the pace of growth of​ _____ and​ _____.

labor​ productivity; potential GDP

An economy grows when it does all of the following except

lowers prices

A decrease in the marginal propensity to import​ _______, everything else remaining the same.

makes the multiplier larger

The objectives of U.S. monetary policy are to achieve​ ______.

maximum employment and stable prices

The trend money growth rate​ ______.

minus the trend real GDP growth rate determines the trend inflation rate

Compared to the developing​ economies, the advanced economies have​ _______ human capital and​ _______ physical capital.

more; more

​Initially, the economy is at​ full-employment when aggregate demand increases. The increase in aggregate demand creates a​ _______ the​ short-run aggregate supply curve and​ a_______ the​ short-run Phillips curve.

movement up​ along; movement up along

A country that is lending more to the rest of the world than it is borrowing from the rest of the world is a​ ______. A country that during its entire history has invested more in the rest of the world than other countries have invested in it is a​ ______.

net​ lender; creditor​ nation;

The supply of money is the relationship between the quantity of money supplied and the​ _

nominal interest rate

An economic model is a description of some features of the economic world that includes​ _____ features assumed necessary to explain the​ _____facts.

only​ those; observed

If the CPI rises from 120 to​ 126, then​ ______

on​ average, the price paid by urban consumers for a fixed basket of consumer goods and services rises by 5 percent

If the CPI rises from 120 to​ 126, then​ ______.

on​ average, the price paid by urban consumers for a fixed basket of consumer goods and services rises by 5 percent

According to new growth​ theory, ______. . economic growth most often occurs in economies with large​ populations, such as what we see in China today B. our unlimited wants will lead us to ever greater productivity and perpetual economic growth Your answer is correct.C. prosperity will last but growth will not last because eventually technology stops advancing D. technological advances are determined by chance

our unlimited wants will lead us to ever greater productivity and perpetual economic growth

Diminishing returns do not limit growth in new growth theory because​ ______.

physical activities can be replicated

Classical growth theory​ ______

predicts that the clash between an exploding population and limited resources will eventually bring economic growth to an end

In the long​ run, money market equilibrium determines the​

price level

The CPI tells us the​ ______ in the reference base period. The CPI in the reference base period is by definition equal to​ ______.

price level in a given period expressed as a percentage of the price​ level; 100

Loanable funds come from ​ ______.

private​ saving, a government budget​ surplus, and international borrowing

A substitute in production is a good that is​ _____ another​ good, and a complement in production is a good that is​ _____ another good.

produced in place​ of; produced together with

If governments in Africa​ _______ they will encourage economic growth and raise the standard of living.

protect private property

A supply schedule is a list of the​ ______ at each different price when all other influences on selling plans remain the same. A supply curve is a graph of​

quantities​ supplied; a supply schedule

Adrienne graduates from college and her income increases by ​$20 comma 000. Nothing else changes. Adrienne decreases the quantity of ramen noodles and potato chips that she buys and increases the quantity of ski trips that she buys. For Adrienne​,

ramen noodles and potato chips are inferior goods

The economic growth rate is the annual percentage change of​ ______.

real GDP

Labor productivity equals​ _____

real GDP divided by aggregate hours

A rise in the price level​ _______.

shifts the AE curve downward and brings a movement up along the AD curve

Brazil's inflation rate was 9.28 percent in the past twelve months. food and beverage prices rose more than one percent per month. ​Source: Bloomberg, May​ 6, 2016 Explain the effect of a rise in the price level on​ Brazil's equilibrium expenditure. A rise in the price level​ _______ and equilibrium expenditure​ _______.

shifts the AE curve​ downward; decreases

An increase in expected future income​ ______.

shifts the consumption function upward

In the African nation of​ Senegal, to enroll in school a child needs a birth certificate that costs​ $25. This price is several​ week's income for many families. Explain how this requirement is likely to affect the growth of human capital in Senegal. Because of this requirement we would expect to see​ _______.

slow growth of human capital in Senegal and particularly slow growth in the human capital of girls and women

The U.S. interest rate differential rises when​ ______.

the U.S. interest rate rises and the foreign interest rate falls 19-7

The three types of financial markets are​ ______.

stock​ markets, bond​ markets, and loans markets

Job rationing creates a​

surplus of labor

The core inflation rate is​ ______.

the annual percentage change in the Personal Consumption Expenditure Price Index excluding the prices of food and energy

To calculate the​ multiplier, we divide​ ______ by​ ______.

the change in equilibrium​ expenditure; the change in autonomous expenditure

When there is a shortage of dollars in the foreign exchange​ market, ______.

the forces of supply and demand pull the foreign exchange market into equilibrium 19-6

The inflation rate is 1.5 percent a​ year, the unemployment rate is 4​ percent, and the economy is at full employment. ​Unexpectedly, the Fed increases the money growth rate to raise the inflation rate to 3 percent a year. In the short​ run, ______.

the inflation rate rises and the unemployment rate falls

Human capital is​ _______

the knowledge and skill that people obtain from​ education, on-the-job​ training, and work experience

If we observed a rise in the price of beef and a decrease in the quantity of beef that producers​ sell, the most likely explanation would be that​

the law of supply applies to beef​, but some other influence on selling plans has also changed and the supply of beef has decreased

The graph shows a​ short-run Phillips curve. Draw an arrow on the curve that shows the effect of an unexpected increase in aggregate demand. When aggregate demand unexpectedly​ increases, ______.

the natural unemployment rate does not change 15-4

When the real wage rate is above the​ full-employment equilibrium​ leve

the natural unemployment rate increases

An open market operation is​ ______

the purchase or sale of government securities by the Federal Reserve System in the open market

If the price of a smartphone rises​, with all other influences on buying plans remaining the​ same, _______.

the quantity of smartphones demanded decreases

If the price of a smartphone falls​, with all other influences on buying plans remaining the​ same

the quantity of smartphones demanded increases

The table shows some of the items in​ Northland's National Income and Product Accounts in 2016. Calculate​ Northland's net domestic product at factor cost in 2016. ​Northland's net domestic product at factor cost in 2016 is ​$ 1215 billion. Item Amount ​(billions of​ dollars) Consumption expenditure: 885 Wages: 815 Government expenditure:350 ​Interest, rent, and profit: 400 Indirect taxes less subsidies: 165 Depreciation: 200 Investment: 300 Net exports: 35

​$1215 billion.

If tax revenues are​ $3,500 billion and the​ government's budget balance is a​ $720 billion​ deficit, calculate the​ government's outlays.

​$4,220

Real GDP growth rate​ = ______.

​[(Real GDP in current yearminusReal GDP in previous ​year) divided by Real GDP in previous ​year] times 100

Between 2014 and​ 2015, traders expected the U.S. dollar to​ ______ against the euro and it​ ______.

​appreciate; did appreciate

The multiplier is the amount by which a change in​ ______ expenditure is magnified or multiplied to determine​ ______.

​autonomous; the change in equilibrium expenditure and real GDP

A marginally attached worker is a person who does not have a​ job, is​ _____ and​ _____ to​ work, has​ _____ specific efforts to find a job within the previous​ _____ weeks, but has looked for work sometime in the recent past.

​available; willing; not​ made; four

Still on the​ job, but at half the pay In past​ recessions, firms have cut their labor costs by laying off workers. During this​ recession, many firms and state governments have trimmed labor costs by cutting pay or shortening the​ workweek, rather than laying off workers. ​Source: The New York Times​, October​ 13, 2009 What effect might the strategy of cutting pay or the workweek rather than laying off workers have on the depth of the recession and the unemployment​ rate? In comparison to laying off​ workers, cutting pay and shortening the workweek​ ______ the unemployment rate and makes the recession​ ______.

​decreases; less deep

When the quantity of loanable funds supplied​ ______ the quantity of loanable funds​ demanded, the real interest rate falls to eliminate the​ ______ of funds.

​exceeds; surplus

The supply of loanable funds increases when disposable​ income______ or wealth​ ______

​increases; decreases

Households are individuals or groups of people​ _____ together. Firms are institutions that organize​ _____ of goods and services.

​living; the production

Inflation targeting is a​ _____ policy strategy in which the​ _____ makes a public commitment to achieving an explicit​ _____ target and to explaining how its policy actions will achieve that target.

​monetary; central​ bank; inflation

Capital consists of​ _______.

​tools, instruments,​ machines, buildings, and other items that have been produced in the past and that businesses now use to produce goods and services

What to do with​ $50,000 now A good​ strategy: Put about​ two-thirds of the money into bonds of developed nations and the rest into riskier​ emerging- market bonds. ​Source: CNNMoney.com What is the opportunity cost of holding​ money? If lots of people put their money into​ bonds, how will the demand for money and the interest rate​ change? The opportunity cost of holding money is​ ______. When lots of people followed this advice and put their money into​ bonds, the demand for money​ _____ and the interest rate on bonds​ _____.

-the interest rate forgone on an alternative asset -​decreases; falls

Two​ countries, Arctica and Antarctica​, produce only two​ goods: frozen fish and party ice. The table gives their production possibilities. ​_______ has a comparative advantage in producing frozen fish and​ _______ has a comparative advantage in producing party ice.

. Arctica​; Antarctica ref: CH3Q3

Choose the correct statements. 1. Upper A rise in the exchange rate is called an appreciation of the dollar 2. In a growing economy comma the exchange rate is always rising 3. The foreign exchange market is a place 4. Foreign currency is the money of other countries

. Statements 1 and 4 are correct.

The quantity of money demanded is the amount of money that households and firms choose to​ _____.

. hold

The spread of ATMs and the increased use of debit cards​ ______ money. Everything else remaining the​ same, the nominal interest rate​ ______.

. increase the demand​ for; rises

The slope of the production function becomes​ _______ steep as the quantity of​ _____ increases because of diminishing returns

. ​less; labor

The federal funds rate is the interest rate at which banks can borrow and lend​ _____ in the​ _____ market.

. ​reserves; federal funds

A change in the expected future exchange rate changes the supply of U.S. dollars​ ______, and a change in U.S. demand for imports changes the supply of U.S. dollars​ ______.

. ​today; today 19-9

Emily owns an ice cream parlor. In an hour she can produce 40 milkshakes or 40 ice cream sundaes. Ben also owns an ice cream parlor. In an hour he can produce 20 milkshakes or 10 ice cream sundaes. ​Emily's opportunity cost of producing 1 milkshake is​ _____. Ben's opportunity cost of producing 1 milkshake is​ _____

1 ice cream sundae​; 0.5 ice cream sundae "Ben" has a comparative advantage in the production of milkshakes.

An economy follows​ Okun's Law. The natural unemployment rate is 6 percent and potential GDP is​ $11 trillion. When the actual unemployment rate is 7 ​percent, real GDP is​ _____

10.8 Trillion

he natural unemployment rate is 6 percent and the expected inflation rate is 10 percent a year. Draw the​ long-run Phillips curve. Label it LRPC0. Draw the​ short-run Phillips curve. Label it SRPC0. Draw a point at the natural unemployment rate and the expected inflation rate. Label it 1. Now the natural unemployment rate rises to 9 percent with no change in the expected inflation rate. Draw and label LRPC1. Draw and label SRPC1. Draw a point at the natural unemployment rate and the expected inflation rate. Label it 2.

15-13

The graph shows the labor force participation rate of women in the U.S. labor market between 1970 and 2016. The labor force participation rate of women increased most during the​ _______.

1970s 6-5

You deposit​ $200 in a savings account on January​ 1, and the bank pays you interest of​ $10 at the end of the year. During the​ year, the average price level rises by 2 percent. The real interest rate on your savings account is​

3 percent a year

According to Peter Howitt of Brown​ University, if inflation is lowered from 3 percent a year to​ zero, then in 30 years the accumulated value of all additional output produced would be worth​ ______ percent of current GDP.

85

Classify each of the following items as a final good or service or an intermediate good or​ service, and identify which is a component of consumption​ expenditure, investment, or government expenditure on goods and services. A. Steel sheets bought by General Motors B. Upper A new house bought by Beyoncé C. Upper A DVD bought by a household D. The purchase of a new aircraft for the vice dash president

A is an intermediate good​, B is a final good that is investment​, C is a final good that is consumption expenditure​, and D is a final good that is government expenditure.

What does classical growth theory say will eventually end economic​ growth?

A population explosion that leads to a fall in labor productivity and the return of real GDP per person to the subsistence level

In 2015 and in​ 2016, consumers in Dexter purchased only books and pens. The prices and quantities for 2015 and 2016 are listed in the table. The reference base period for​ Dexter's CPI is​ 2015, and 2015 is also the year of the Consumer Expenditure Survey. The inflation rate in 2016 is​ ______ percent.

A. 59.1

Which of the following is included in the measure of U.S.​ GDP

A. a 2013 Grand Am produced and sold as a new car in the United States in 2013

Over​ time, ______. A. both the demand for loanable funds and the supply of loanable funds trend​ upward, but the real interest rate has no trend Your answer is correct.B. the demand for loanable funds trends​ upward, the supply of loanable funds trends​ downward, and the real interest rate trends upward C. both the demand for loanable funds and the supply of loanable funds trend​ upward, and the real interest rate also trends upward D. the demand for loanable funds trends​ downward, the supply of loanable funds trends​ upward, and the real interest rate trends upward

A. both the demand for loanable funds and the supply of loanable funds trend​ upward, but the real interest rate has no trend

According to classical growth​ theory, when real GDP per person​ ______, the population grows. A. exceeds the subsistence level Your answer is correct.B. exceeds capital per hour of labor C. is less than capital per hour of labor D. is less than the subsistence level

A. exceeds the subsistence level

According to classical​ macroeconomics, ______.

A. no remedy by government can improve on the performance of the market

Saving is the amount of income that is​ _____ in net taxes or spent on​ _____ goods and services.

A. not​ paid; consumption

New growth theory predicts that economic growth will never end because​ _______. A. our unlimited wants will lead us to make choices that will bring​ ever-greater productivity and perpetual economic growth. Your answer is correct.B. the world population growth rate is slowing down C. the world population growth rate is rising at an increasing rate D. competition increases profit E. productivity decreases as robots and computers take over more of the work previously done by humans

A. our unlimited wants will lead us to make choices that will bring​ ever-greater productivity and perpetual economic growth.

The economic growth rate is the annual percentage change of​ _____. A. real GDP Your answer is correct. B. real income C. interest rates D. the real wage rate

A. real GDP

The productivity curve is the relationship that shows how​ _____ changes as the quantity of​ _____ changes

A. real GDP per hour of​ labor; capital per hour of labor

The CPI market basket consists of items that​ ______ buy and​ ______. A. urban​ households; the Consumer Expenditure Survey is used to update it frequently Your answer is correct.B. all​ households; a greater weight is put on the items purchased by urban households C. all​ households; the reference base period changes whenever the market basket changes D. urban​ households; it is updated every month

A. urban​ households; the Consumer Expenditure Survey is used to update it frequently

The news headline ​"Space travel only for rich and fit​" deals with the​ ______​ question(s) of economics.

A. what and for whom

A marginally attached worker is a person who does not have a​ job, is​ _____ and​ _____ to​ work, has​ _____ specific efforts to find a job within the previous​ _____ weeks, but has looked for work sometime in the recent past.

A. ​available; willing; not​ made; four

The demand for dollars increases if the U.S. interest rate differential​ ______ or the expected future exchange rate​ ______.

A. ​increases; rises

Two​ countries, Alpha and​ Beta, have identical production possibilities frontiers. If Alpha produces at point A and Beta produces at point B​, then​ _______. B is higher than A on a Downward slope

Alpha consumes more than Beta​ today, but it will grow slower than Beta

Two​ countries, Alpha and​ Beta, have identical production possibilities frontiers. If Alpha produces at point A and Beta produces at point B​, then​ _______.

Alpha consumes more than Beta​ today, but it will grow slower than Beta ref 3-8

Real GDP growth rate​ = ______. A. ​[(Real GDP in current yearminusReal GDP in previous ​year) divided by Real GDP in current ​year] times 100 B. ​[(Real GDP in current yearminusReal GDP in previous ​year) divided by Real GDP in previous ​year] times 100 Your answer is correct.C. ​[(Real GDP in previous yearminusReal GDP in current ​year) divided by Real GDP in current ​year] times 100 D. ​[(Real GDP in previous yearminusReal GDP in current ​year) divided by Real GDP in previous ​year] times 100

B. ​[(Real GDP in current yearminusReal GDP in previous ​year) divided by Real GDP in previous ​year] times 100

Choose the statement about money that is correct. A. Barter requires a double coincidence of wants. This is the correct answer.B. Money is a completely stable store of value. C. Inflation brings a rising value of money. D. Upper A work of art is an example of money because it can act as a store of value.

Barter requires a double coincidence of wants.

______ macroeconomics is the view that the market economy works​ well, that aggregate fluctuations are a natural consequence of an expanding​ economy, and that government intervention cannot improve the efficiency of the market economy.

C. Classical

Classical macroeconomics​ _______

C. fell into disrepute during the Great Depression

According to new growth​ theory, the driving force of economic growth is​ ______. A. better math skills B. an increase in the working dash age population Your answer is not correct.C. growth results from the choices that people make in the pursuit of profit This is the correct answer.D. the population growth rate E. the expansion of a country's highway system

C. growth results from the choices that people make in the pursuit of profit This is the correct answer.

Aggregate demand if the exchange rate​ ______ or foreign income ​______.

C. increases​; decreases

Gross national product is​ ______. A. the sum of​ wages, interest,​ rent, and profit Your answer is not correct.B. the income received by households minus personal income taxes paid C. the market value of all the final goods and services produced anywhere in the world in a given time period by the factors of production supplied by the residents of that country This is the correct answer.D. the market value of all the final goods and services produced within a country in a given time period

C. the market value of all the final goods and services produced anywhere in the world in a given time period by the factors of production supplied by the residents of that country This is the correct answer.

Aggregate demand if monetary policy​ ______ the quantity of money and​ ______ interest rates.

D. decreases​; increases

Aggregate demand decreases if expected future​ income, inflation, or profits​ ______. And aggregate demand if fiscal policy​ ______ government expenditure.

D. decrease​; decreases

According to​ Malthusians, _______. A. if​ today's global population reaches 11 billion by​ 2200, the world will see the greatest prosperity in its history B. our unlimited wants lead to greater productivity C. our unlimited wants lead to a decrease in the population D. if​ today's global population reaches 11 billion by​ 2200, we will return to a primitive standard of living

D. if​ today's global population reaches 11 billion by​ 2200, we will return to a primitive standard of living

Aggregate demand if fiscal policy​ ______ taxes or​ ______ transfer payments.

D. increases​; decreases

The demand for money is the relationship between the quantity of money demanded and the​ _______ when all other influences on the amount of money that people wish to hold remain the same.

D. nominal interest rate

Olivia and Helen produce afghans and quilts. The figure shows​ Olivia's PPFO and​ Helen's PPFH. Olivia and Helen can achieve gains from trade if​ _______. A. Olivia sells afghans to Helen in exchange for some of the quilts that Helen produces B. Olivia sells both afghans and quilts to Helen in exchange for money C. Helen sells both afghans and quilts to Olivia in exchange for money D. Helen sells afghans to Olivia in exchange for some of the quilts that Olivia produces

Helen sells afghans to Olivia in exchange for some of the quilts that Olivia produces 3-6

Which of the following statements about the market for chicken describes a change in the quantity demanded and which describes a change in demand​? I People are buying less chicken because the price of beef has fallen. II People are buying less chicken because the price of chicken has increased. III People are buying more chicken because the price of chicken has fallen. IV The cost of chicken feed has increased.

I is a change in demand and II and III are changes in the quantity demanded.

Which of the following statements is about a normal good​, which is about an inferior good​, which is about​ both, and which is about​ neither? I With incomes falling in the​ recession, people are buying more chicken. II People are buying more beef now that incomes have increased. III People are buying more chicken because the price of chicken has fallen. IV With higher incomes people are switching from chicken to beef.

I is​ inferior, II is​ normal, III is​ neither, and IV is both

Which of the following illustrates a tradeoff​?

I will study for my exam instead of going for the movie tonigh

Which of the following statements by Aqua Springs demonstrates that the​ firm's selling plans obey the law of supply

If the price of bottled water falls and all the other influences on our selling plans remain the​ same, we will cut back on production and lay off some workers

In June 2014​, traveler's checks in circulation were ​$3 ​billion; checkable deposits owned by individuals and businesses were $ 1 comma 635 ​billion; Upper M 1 was $ 2 comma 857 ​billion; money market funds and other deposits were $ 631 ​billion; Upper M 2 was $ 11 comma 424​; and savings deposits were $ 7 comma 406 billion. Calculate currency held by individuals and businesses in June 2014. Calculate small time deposits in June 2014.

In June 2014 currency held by individuals and businesses was ​$ 1,219 billion. Small time deposits in June 2014 were ​$ 530 billion.

Every​ week, Kate plays the piano for four hours​, and her grade on each English test is 90 percent. Last​ week, after playing for four hours​, Kate considered playing for another hour. She decided to play for another hour and cut her study time by one hour. But last​ week, her English grade fell to 85 percent. Did Kate make her decision on the​ margin?

Kate made her decision at the margin because she considered the benefit and cost of one additional hour of playing the piano.

The magnitude of the tax multiplier is equal to​ _______.

MPC times the government expenditure multiplier

During​ 2016, Simon's Recording Studio spent ​$45​,000 on new machines. ​Simon's depreciation was ​$3​,000. What was​ Simon's net​ investment?

Net investment was ​$ 42000.

An economy produces only​ robots, pens, and pizza. The table gives the quantities produced and prices in 2016 and 2017. The base year is 2016. What is nominal GDP in 2016 and in​ 2017?

Nominal GDP in 2016 is ​$ 16. Nominal GDP in 2017 is ​$ 116. 5-5

The table shows an​ economy's total production and the prices of the final goods it produced in 2016 and 2017. Calculate nominal GDP in 2016 and nominal GDP in 2017. In 2016 Item Quantity Price Fish 130 ​$2 Berries 50 ​$5 In 2017 Item Quantity Price Fish 75 ​$4 Berries 75 ​$10

Nominal GDP in 2016 is ​$ 510. Nominal GDP in 2017 is ​$ 1050.

Bureau of Economic Analysis data show that for the period 1929 through 2008 the average annual increase in the GDP price index is 3.0 percent. The Bureau of Labor Statistics data show that for the period 1929 through​ 2008, the average annual increase in the CPI is 3.2 percent. Although the difference of 0.2 percentage points is​ small, maintained over the 79 year​ period, the CPI rose by 17 percent more than the GDP price index. How would you explain the difference in these two inflation​ measures? Choose the correct statement.

The GDP price index uses the prices of all the goods and services in GDP.

Choose the correct statement. A. The United States is a net borrower. China and Saudi Arabia are net lenders. This is the correct answer.B. The United States and China are net borrowers. Saudi Arabia is a net lender. C. Saudi Arabia is a net borrower. The United States and China are net lenders. D. China and Saudi Arabia are net borrowers. The United States is a net lender.

The United States is a net borrower. China and Saudi Arabia are net lenders.

Which statement is an example of economics as a policy​ tool?

The federal government is cutting taxes

The table gives some items from the national income and product accounts. Calculate the government sector​ balance, the private sector​ balance, and net exports. ​>>> Record a negative balance with a minus sign. Do not record a positive

The government sector balance is negative 150 billion dollars. The private sector balance is negative 150 billion dollars. Net exports is negative 300 billion dollars. GOVT SECT BALANCE:Net taxes minus Govt EXP PRIV SECT BAL: Saving- Investments NET EXP: GOVT + PRIV BAL

Consider the​ long-run Phillips​ curve, and then choose the correct statement.

The inflation rate can take on any value at full employment.

The figure shows the​ short-run and​ long-run Phillips curves. The current inflation rate is 5 percent a year. The Fed announces that it will slow the money growth rate so that inflation will fall to 2.5 percent a year. If no one believes the Fed and expected inflation remains at 5 percent a​ year, explain the effect of the​ Fed's action on inflation and unemployment next year. Choose the correct statement.

The inflation rate will fall and the unemployment rate will increase in a movement down the​ short-run Phillips curve. 15-3

Choose the correct statement. A. The level of aggregate expenditure that occurs where the AE curve intersects the 45degrees line is equilibrium expenditure. Your answer is correct.B. Equilibrium expenditure occurs at all points along the 45degrees line. C. Equilibrium expenditure occurs at the point at which the AE curve intersects the x​-axis. D. Equilibrium expenditure occurs at all points along the AE curve.

The level of aggregate expenditure that occurs where the AE curve intersects the 45 degrees line is equilibrium expenditure.

In an economy without taxes and​ imports, an increase in investment of​ $50 billion increases equilibrium expenditure by ​$125 billion. What are the values of the multiplier and the slope of the AE​ curve?

The multiplier is 2.5 and the slope of the AE curve is . 6.

The real wage rate is ​$11.00 an hour and the CPI is 115. What is the nominal wage​ rate?

The nominal wage rate is ​$ 12.65 an hour.

Which of the following statements by Tom demonstrates that his buying plans obey the law of demand​?

The only thing​ that's changed is the price of​ textbooks: they've become more expensive and now​ I'm not buying as many.

Which of the following is an example of government expenditure on goods and​ services A. Welfare payments B. All expenditure by lobbyists C. The purchase of airline tickets by Congress to send members to visit overseas troops Your answer is correct.D. The salaries paid to Washington correspondents from major networks and newspapers

The purchase of airline tickets by Congress to send members to visit overseas troops

The velocity of circulation is 4 and GDP is $ 12 billion. What is the quantity of money​?

The quantity of money is $3 billion.

Consider aggregate supply and then choose the statement that is correct.

The quantity of real GDP supplied equals potential GDP at the price level at which the real wage rate is at its​ full-employment equilibrium level.

The table shows the market for apartments. If a rent ceiling is set at​ $900 a​ month, what is the housing​ shortage? If a rent ceiling is set at​ $1,500 a​ month, what is the housing​ shortage? When a rent ceiling is set at​ $900 a​ month, the housing shortage is 300 apartments a month. When a rent ceiling is set at​ $1,500 a​ month, the housing shortage is 0 apartments a month. Rent/ Quantity demanded/ Quantity supplied/ ​(dollars per​ month) ​(apartments per​ month) 300 ​1,300 400 600 ​1,100 500 900 900 600 ​1,200 700 700 ​1,500 500 800

When a rent ceiling is set at​ $900 a​ month, the housing shortage is (300) apartments a month. When a rent ceiling is set at​ $1,500 a​ month, the housing shortage is (0) apartments a month. 4-11

Choose the correct statement. A. The balanced budget multiplier is equal to zero. B. When both government expenditure and taxes decrease by​ $1, aggregate demand decreases. This is the correct answer.C. The balanced budget multiplier is positive because an increase in government expenditure increases disposable income. Your answer is not correct.D. The balanced budget multiplier is the magnification effect on aggregate demand of a simultaneous increase in aggregate demand and an equal decrease in taxes.

When both government expenditure and taxes decrease by​ $1, aggregate demand decreases.

ADB reduces China growth estimate Since 1980​ China's real GDP per person has grown at 10 percent a year. The Asian Development Bank​ (ADB) cut its estimate for​ China's growth to 9.3 percent this year. ​Source: Bloomberg, September​ 13, 2011 If​ China's growth rate remains at 9.3 percent a​ year, how many additional years will it take for China to double its real GDP per​ person?

When real GDP per person grows at 10 percent a​ year, real GDP per person in China doubles in 7 years. ​>>> Answer to 1 decimal place. When real GDP per person grows at 9.3 percent a​ year, real GDP per person in China doubles in 7.5 years. ​>>> Answer to 1 decimal place. When the growth rate of real GDP per person decreases from 10.0 percent to 9.3 percent a​ year, real GDP per person will double 0.5 years later. ​>>> Answer to 1 decimal place.

The amount of​ job-search unemployment increases when​

a prolonged structural slump occurs

The graph illustrates the market for tea. The initial equilibrium is at point A. After one or more​ changes, the new equilibrium moves to point B. You predict that the market for tea was influenced by​ ______

a rise in household income and an increase in the number of plantations 4-2

An example of a capital good is

a satellite communication system

If the government sets a price on dog food that is below the equilibrium​ price

a shortage of dog food occurs

The U.S. unemployment rate​ ______.

averaged 5.8 percent between 1948 and 2016

CBO expects higher​ long-term deficits The Congressional Budget Office​ (CBO) says the national debt is on an upward path and will hit 122 percent of GDP in 2040. Healthcare programs and Social Security benefits are the large drivers of spending over the coming decades. ​Source: The Wall Street Journal​, July​ 12, 2016 If the government decided to slow the growth of debt by cutting transfer payments and raising taxes by the same​ amount, how would this fiscal policy influence the budget deficit and real​ GDP? Cutting transfer payments and raising taxes by the same amount​ _______. The​ supply-side effect of an increase in taxes​ _______ employment and​ _______ real GDP.

decreases the budget​ deficit, decreases aggregate​ demand, and decreases real GDP ​decreases; decreases

The Fed decreases the quantity of money. In the short​ run, the quantity of money demanded​ ______ and the nominal interest rate​ ______.

decreases​; rises

The United Nations HDI is based on GDP per​ person, life expectancy at​ birth, and indicators of the quality and quantity of education. The United States​ _______ have the highest HDI in part because​ _______. Adding​ _______ to the current HDI index would not create a better standard of living index.

does​ not; Americans do not have access to universal healthcare real GDP

A discretionary monetary policy is a monetary policy that is based on an expert assessment of the current​ _____.

economic situation

Event 1 The Middle East cuts supplies of oil to the United States. 2 The New York Yankees win the World Series. 3 U.S. labor unions negotiate wage hikes that affect all workers. 4 A huge scientific breakthrough doubles the output that an additional hour of U.S. labor can produce. 5 Migration to the United States increases the​ working-age population. An increase in potential GDP results from​ ______. A decrease in potential GDP results from​ ______.

events 4 and​ 5; events 1 and 3

The U.S. saving rate increased from minus0.1 percent in 2011 to 2.0 percent in 2012 to 2.4 percent in​ 2013, to 2.9 percent in​ 2014, and to 3.0 percent in 2015. A negative saving rate might be something to worry about because​ ______. U.S. saving might be increased by​ ______.

eventually households must repay their​ borrowing; decreasing taxes on interest income

The velocity of circulation is the average number of times in a year that each dollar of money gets used to buy​ ______. The formula used to measure the velocity of​ circulation, V​, is​ ______, where P is the price​ level, Y is real​ GDP, and M is the quantity of money.

final goods and​ services; V​ = ​(P times ​Y) divided by M

A financial institution is a firm that operates on both sides of the markets for​ _____: It​ _____ in one market and​ _____ in another.

financial​ capital; borrows; lends

Payments for labor services flow from​ ______ through the​ ______ markets.

firms to​ households; factor

The​ Fed's $2.2 trillion fire hose The Fed threw a lot of money at the financial crisis in 2008 to unfreeze credit markets and encourage economic activity. As part of its effort to keep the interest rate​ low, the Fed purchased government bonds worth​ $300 billion between March and September 2009. By​ October, the Fed held​ $770 billion in government​ securities, nearly double its​ pre-crisis total. Before the​ crisis, the Fed held mainly government​ securities, which it used to control the quantity of money in the economy. Now government securities make up just​ 35% of the​ Fed's balance sheet. ​Source: CNN​ Money, October​ 9, 2009 If the Fed purchased the government securities on the open​ market, explain why the purchase of​ $300 billion of government securities would influence the interest rate. If the Fed purchases the government securities on the open​ market, the quantity of money​ ______ because​ _______. The nominal interest rate​ _______.

increases; bank reserves increase falls

People are more likely to accept a real wage cut that arises from an increase in the CPI than a cut in their nominal wage rate because​ ______.

inflation decreases the real wage rate gradually and a cut in the nominal wage decreases the real wage rate suddenly

An economy at full employment experiences an unexpected reduction in the inflation​ rate, which​ ______.

initially increases the unemployment rate above the natural unemployment rate

The figure shows an​ economy's production possibilities frontier and identifies some production points. We can produce all combinations​ ______. A. inside the PPF but not on the PPF or outside the PPF B. inside the PPF and on the PPF Your answer is correct.C. on the PPF but not inside or outside the PPF D. on the PPF and outside the PPF E. inside the PPF​, on the PPF​, and outside the PPF

inside the PPF and on the PPF

Currency​ _________. A. inside the banks is not money because it​ isn't available as a means of payment This is the correct answer.B. inside ATMs is money because it is a store of value for the bank Your answer is not correct.C. is money and bank deposits are not money D. and debit cards are fiat money

inside the banks is not money because it​ isn't available as a means of payment

Nominal GDP targeting is a monetary policy rule that adjusts the​ _____ rate to achieve a target growth rate for nominal GDP.

interest

When the unemployment rate is​ ______ than the natural unemployment​ rate, cyclical unemployment is​

less; negative

An economy grows when it does all of the following except ​_______.

lowers prices

A structural boom​ ______

lowers the natural unemployment rate because new jobs are found quickly

The economic growth rate is the annual percentage change of​ ______. A. the quantity of money B. real GDP Your answer is correct.C. real GDP per person D. labor productivity

real GDP

The quantity theory of money is the proposition that when​ ______, an increase in the quantity of money brings​ ______ percentage increase in the price level. A. real GDP exceeds potential​ GDP; a greater B. real GDP equals potential​ GDP; an equal This is the correct answer.C. real GDP equals potential​ GDP; a smaller D. real GDP exceeds potential​ GDP; an equal Your answer is not correct.E. an inflationary gap​ exists; a greater

real GDP equals potential​ GDP; an equal

The productivity curve is the relationship that shows how​ _____ changes as the quantity of​ _____ changes.

real GDP per hour of​ labor; capital per hour of labor

The​ ______ is the opportunity cost of the funds used to finance the purchase of capital. The​ ______ is the opportunity cost of consumption expenditure.

real interest​ rate; real interest rate

The ​crowding-out effect is the tendency for a government budget deficit to raise the​ _____ and​ _____ investment.

real interest​ rate; decrease

Aggregate supply is the relationship between the quantity of​ _____ supplied and the​ _____ when all other influences on production plans remain the same.

real​ GDP; price level

When the price level and the money wage rate rise by the same​ percentage, unemployment​ _______.

remains the same

An increase in the demand for hot dogs brings a​ ______ in the price of a hot dog and​ ______ in the quantity of hot dogs supplied

rise​; an increase

The​ Fed's "dual​ mandate" is to achieve​ _______. The means to achieving the goals of the dual mandate are​ _______.

stable prices and maximum employment maintaining the​ long-run growth of the monetary and credit aggregates commensurate with the​ economy's long-run potential to increase production

Property rights encourage economic growth by

strengthening the incentive to​ work, save,​ invest, and accumulate human capital

When unemployment benefits​ increase, the​ ______.

supply of labor​ decreases, and potential GDP decreases as a movement occurs down along the production function

Economic growth is defined as the ​ ____

sustained expansion of production possibilities

For young​ people, a jobless summer In July​ 2009, the youth unemployment rate hit 18.5 percentlong dashthe highest level since the BLS started recording youth labor statistics. The proportion of young people working was 51.4​ percent, another historic low for the month of July. ​Source: The Wall Street Journal​, August​ 27, 2009 The table sets out the youth labor force participation rate and youth unemployment rate. During which recession did the labor force participation rate drop the​ most? During​ ______ ​ recession, the youth labor force participation rate dropped​ ______.

the 2008-2009; the most 6-9

The Federal Reserve Act makes​ ______ responsible for the conduct of monetary policy.

the Board of Governors of the Federal Reserve System and the Federal Open Market Committee

The graph shows the supply of loanable funds and the demand for loanable funds in an economy. Suppose the government has a budget deficit of​ $0.2 trillion and the​ Ricardo-Barro effect holds. Draw the new demand for loanable funds curve. Label it. Draw the new supply of loanable funds curve. Label it. Draw a point that shows the equilibrium quantity of loanable funds and interest rate. The​ Ricardo-Barro effect is the proposition that______

the budget deficit has no effect on the real interest rate or investment 10-4

The marginal propensity to import is equal to​ _______.

the change in imports divided by the change in real​ GDP, other things remaining the same

The quantity of U.S. dollars that traders plan to sell in the foreign exchange market in a given period of time is independent of​ ______.

the demand for U.S. dollars in the foreign exchange market

The unemployment rate jumped to​ 5.5% in May 2008 from​ 5% in April 2008. This jump was the biggest​ one-month jump in unemployment since February​ 1986, and the​ 5.5% rate is the highest level seen since October 2004. ​ Source: CNN, June​ 6, 2008 Why might the unemployment rate tend to actually underestimate the unemployment​ problem, especially during a​ recession? The unemployment rate tends to actually underestimate the unemployment​ problem, especially during a recession because​ ______.

the number of marginally attached workers​ increases, but these workers are not included in the official unemployment rate

Which of the following is an example of​ investment? A. a student increasing his human capital by attending college Your answer is not correct.B. a person money adding money to his retirement fund C. the purchase of new bookshelves by Barnes and Noble This is the correct answer.D. a person's annual medical checkup

the purchase of new bookshelves by Barnes and Noble This is the correct answer.

In a market with job​ rationing

the quantity of labor supplied persistently exceeds the quantity demanded

The natural rate hypothesis is the proposition that when the inflation rate​ changes, ______. Eventually​ ______.

the unemployment rate changes​ temporarily; the unemployment rate returns to the natural unemployment rate

We use a​ time-series graph to show​ ______.

the upward trend in the average level of prices since the Depression

Fiscal policy is​ ______. The​ ______ proposes a budget to​ ______. The​ ______ passes the budget acts in​ ______.

the use of the federal budget to achieve macroeconomic objectives ​President; Congress each February ​Congress; September

If most prices increase in Japan and other countries but remain constant in the United​ States, ______.

then for purchasing power parity to​ hold, the demand for U.S. dollars increases and the supply of U.S. dollars decreases

Your school has decided to increase the intake of new students next year. In reaching its​ decision, would the school use the​ "economic way of​ thinking" and make its decision at the​ margin? Your school would use the​ "economic way of​ thinking" and make its decision at the margin by checking that ​ ____________________..

the​ school's net benefit from an additional student was positive

If the expected inflation rate increases and the natural rate of unemployment remains​ constant, then​ _______.

the​ short-run Phillips curve shifts upward and the​ long-run Phillips curve does not shift

If the Fed changes the quantity of​ money, the immediate effects are on​ ______ and the​ long-run effects are on​ ______.

the​ short-term nominal interest​ rate; the price level and the inflation rate

A change in the expected future exchange rate changes the demand for U.S. dollars​ ______, and a change in the world demand for U.S. exports changes the demand for U.S. dollars​ ______.

today; today

According to​ Keynes, _______.

too little private spending is the cause of depression and recession

The news headline ​"Scientists blast NASA budget cuts comma​" deals with the​ ______​ question(s) of economics.

what

Two​ countries, Alpha and​ Beta, have identical production possibilities frontiers. If Alpha produces at point A and Beta produces at point B​, then​ _______.

​Alpha's and​ Beta's economic growth rates will be the same ref:CH3Q4

The table shows the CPI in Sparta. Calculate the inflation rates in 2014 and 2015. Did the CPI rise or fall in 2015​? Did the inflation rate increase or decrease in 2015​? In 2015​, Sparta​'s CPI​ _______ and its inflation rate​ _______. 2013 CPI 160 2014, 177 2015,200

​Sparta's inflation rate in 2014 was 10.6 percent. Sparta​'s inflation rate in 2015 was 13.0 percent. ​increased; increased

The reference base period for the CPI is​ 1982-1984. In January 2013​, the CPI was 230.3. This number tells us that the​ ______ of the prices paid by urban consumers for a fixed basket of consumer goods and services was​ ______.

​average; 130.3 percent higher in January 2013 than the average of​ 1982-1984

Despite some optimism about the seeds of​ recovery, the Congressional Budget Office​ (CBO) sees joblessness rising. The CBO sees unemployment peaking at​ 10.4% next year from an average of​ 9.3% this​ year, before it falls to​ 9.1% in 2011. ​Source: Fortune​, August​ 25, 2009 Before the recession​ began, the U.S. unemployment rate was about 6 percent. As a recession​ begins, firms quickly make layoffs. Is this rise in unemployment mostly a rise in​ frictional, structural, or cyclical​ unemployment? The resulting rise in unemployment is mostly a rise in​ ______ unemployment because​ _______.

​cyclical; it is related to the state of the economy

An increase in taxes when the economy is above full employment ​ ______ aggregate demand and real​ GDP, and the price level​ ______.

​decreases; falls

A circular flow model shows the interrelationship between the​ ____ markets and the​ ____ markets.

​goods; factor

When a firm decides to use skilled professionals to produce its​ output, it is answering the​ ______ question. When a firm decides to produce computers rather than bikes​, it is answering the​ ______ question. Who gets the goods and services that are produced answers the​ ______ question.

​how; what; for whom

Close to 100 percent of​ Canada's unemployed receive generous benefits compared to 38 percent in the United States. If the United States adopted the level of unemployment benefits that Canada​ has, we would expect the U.S. natural unemployment rate to​ ______ and U.S. potential GDP to​ ______.

​increase; decrease

An increase in disposable income will​ ______ the supply of loanable funds and the adoption of new technology will​ ______ the demand for loanable funds. The equilibrium real interest rate​ ______.

​increase; increase; might​ rise, fall, or stay the same

Real GDP grows when labor productivity​ _______ or when aggregate hours​ _

​increases; increase

An economy is in a below​ full-employment equilibrium. Fiscal stimulus that returns the economy to full employment​ ______ aggregate demand and real​ GDP, and the price level​ ______

​increases; rises

In the United States in​ 2014, the factor of production that earned the largest share of income was​ ______ and it earned​ ______ percent of total income.

​labor; 63

Consider the incomes paid to the factors of production. Wages are paid to​ ____ and interest is paid to​ ____

​labor; capital

nflation can act as a safety valve Workers will more readily accept a real wage cut that arises from an increase in the CPI than a cut in their nominal wage rate. ​Source: FT.com, May 28. 2009 Explain why inflation influences a​ worker's real wage rate. Why might this observation be​ true? An increase in inflation​ ______ a​ worker's real wage rate because as inflation​ rises, _______.

​lowers; the CPI​ rises, and the nominal wage rate divided by CPI decreases

A stock is a certificate of​ _____ and claim to the​ _____ that a firm makes.

​ownership; profits

At a business cycle​ trough, cyclical unemployment is​ ______ and at a business cycle​ peak, cyclical unemployment is​ ______

​positive; negative

A government budget deficit ​ ______ the real interest rate and​ ______ investment.

​raises; crowds out

When the nominal interest rate​ rises, the opportunity cost of holding money​ ______ and the quantity of money demanded​ ______.

​rises; decreases

The Great Depression was a period of high​ _____, low​ _____, and extreme economic hardship that lasted from​ _____ to​ _____.

​unemployment; incomes;​ 1929; 1939

An unexpected increase in aggregate demand​ _______.

. does not shift the​ long-run Phillips curve

The cut in employment at Bank of America results in​ ______ unemployment because​ _______.

​structural; the labor restructuring is in response to changing technology